LONDON, Oct 9, 2008 (AFP) - Britain's local authorities appealed to the government Wednesday to guarantee hundreds of millions of pounds (euros, dollars) of their savings invested in moribund Icelandic banks.

The calls from local councils -- responsible for cultural provisions, refuse collection and other social services -- came just a day after London threatened to take legal action against Iceland to ensure that individual British depositors had their savings returned.

Reykjavik has said that the two countries will work together through official diplomatic channels to try and find a solution.

One local authority, Kent County Council, has 50 million pounds (86 million dollars, 63 million euros) deposited in Landsbanki's British subsidiary Heritable and Glitnir Bank.

Transport for London, the agency responsible for the capital's public transport, has a further 40 million pounds invested with Kaupthing Singer and Friedlander.

The bank, along with Glitner and Landsbanki -- Iceland's three biggest -- have all been nationalised by the government in recent days.

The Local Government Association (LGA), a lobby group, has called on British finance minister Alistair Darling to extend the individual depositor savings guarantee to councils as well.

'The LGA therefore calls on the government to extend to local authorities, who have prudently managed council tax payers' money, the same assurances that money... will be fully protected,' LGA chairwoman Margaret Eaton said in an open letter to Darling.

She noted, however, that councils would not have any immediate financial difficulties because of the frozen investments.

An LGA spokesman told AFP that the group was trying to find out how much, in total, Britain's local authorities had deposited in Icelandic banks, with preliminary estimates running to around the 'low hundreds of millions'.

The 410 local councils in England and Wales are responsible for around 113 billion pounds' worth of spending, and employ around 2.2 million people.